Home About Archives RSS Feed

The Independent Investor: The Debt Ceiling Turnabout

By Bill Schmick
iBerkshires Columnist

Both houses of Congress passed the debt ceiling this week with no strings attached. That means that global investors will be assured that the United States will honor its commitments until at least March 15, 2015. Should we care?

Aside from the moral question of paying one's debt payments on time and a real catastrophe if we don't, the debt ceiling has been one 11th-hour deal after another. It has been pure political theater in this country since 2009. In the Republican-controlled House, only 18 out of the GOP's 232 majority voted for the bill. Two Democrats voted against it. Are you surprised?

If one were naive enough to believe that the Republicans actually believed that America's "out-of-control debt ceiling" was the most dangerous threat to this country, well, I have a bridge I can sell you in Brooklyn.

Both parties clearly understand that the debt ceiling is simply the money that we already owe to our debtors. It is money already spent by our government. Read my lips: by the time it has become debt it has already been spent.

The truth is that both sides of the aisle continue to spend money like drunken sailors. The only difference is in what they buy — guns or butter. Take the latest farm bill, for example. Food stamps were cut, thanks to the GOP, but farm subsidies to the nation's farmers (of whom 80 percent are giant corporations) sailed through the House to the tune of $1 trillion in spending over the next five years. What needs to be reduced is the money government is spending month after month and year after year and there's no indication that will change anytime soon no matter who is in power.

Remember that it is the Republican-controlled states (Red States) that receive the majority of government social spending. For all of their posturing about reducing "welfare spending," the Republicans are not about to bite the hand that feeds them. It's simply the mix of spending that changes between the two parties, not the amount.

Historically, the Democrats tend to spend more on social programs. The Republicans maintain social spending, while cutting taxes. Democrats and Republicans alike have always been happy to spend on defense. Bottom line: both approaches increase the deficit and the debt ceiling.

Clearly, the abrupt turnaround in the Republican's willingness to drop the debt ceiling issue has everything to do with the coming mid-term elections this year. The 16-day, Federal government shutdown last year was a national fiasco. As a result, Republican strategists quickly decided that the party needed to take a break from confrontational politics, at least until the elections are over.

They are counting on the fact that we will forget their past sins by the time November rolls around. It remains to be seen whether voters will be dumb enough to accept their new image as the party of compromise but if they do, and then the GOP has a good chance of capturing a majority in both houses this fall. If their strategy fails, they can always quickly return to partisan politics. Readers please note that the debt ceiling deal expires in March of 2015 and that is no coincidence.

 The pretense that the debt ceiling is some kind of line in the sand that America must not cross is misleading, if not downright duplicitous. At least investors will be spared the needless drama of a debt ceiling battle for the remainder of this year. Hopefully, after the election, both parties will relinquish the debt ceiling as their favorite hostage but I won't hold my breath.

Bill Schmick is registered as an investment adviser representative with Berkshire Money Management. Bill’s forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquires to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.

News Headlines
Brayton Students Enjoy Free Supper Program
Pittsfield's Highland Park Renamed For Christopher R. Porter
Clarksburg Building Committee Seeking More Funds for Study
St Joe Strong: The Crusaders Won't Go Down Without A Fight
House Candidate Connell Calls On State To Address Bel-Air Dam
Adams Police Welcome New Officer
Mount Greylock School Committee Passes Anti-Charter School Resolution
Adams-Cheshire Holds Public Input Meetings This Weekend
Waterstone Makes $20K Down Payment On Pittsfield Walmart Project
Lanesborough Elementary Retains Level 1 Ranking

Bill Schmick is registered as an investment advisor representative and portfolio manager with Berkshire Money Management (BMM), managing over $200 million for investors in the Berkshires. Bill’s forecasts and opinions are purely his own and do not necessarily represent the views of BMM. None of his commentary is or should be considered investment advice. Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of BMM or a solicitation to become a client of BMM. The reader should not assume that any strategies, or specific investments discussed are employed, bought, sold or held by BMM. Direct your inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com Visit www.afewdollarsmore.com for more of Bill’s insights.




@theMarket (213)
Independent Investor (294)
October 2016 (1)
October 2015 (4)
September 2016 (9)
August 2016 (5)
July 2016 (7)
June 2016 (7)
May 2016 (5)
April 2016 (7)
March 2016 (8)
February 2016 (5)
January 2016 (5)
December 2015 (6)
November 2015 (6)
Energy Wall Street Europe Stimulus Congress Deficit Banks Recession Pullback Europe Fiscal Cliff Bailout Crisis Commodities Interest Rates Greece Currency Metals Taxes Oil Debt Economy Election Housing Stock Market Retirement Euro Jobs Selloff Japan Rally Markets Stocks Federal Reserve Debt Ceiling
Popular Entries:
The Independent Investor: Don't Fight the Fed
The Independent Investor: Understanding the Foreclosure Scandal
@theMarket: QE II Supports the Markets
The Independent Investor: Does Cash Mean Currencies?
@theMarket: Markets Are Going Higher
The Independent Investor: General Motors — Back to the Future
The Independent Investor: Will the Municipal Bond Massacre Continue?
@theMarket: Economy Sputters, Stocks Stutter
The Independent Investor: Why Are Interest Rates Rising?
The Independent Investor: How Will Wall Street II Play on Main Street?
Recent Entries:
@theMarket: Day Traders Rule the Markets
The Independent Investor: Dementia & Your portfolio
@theMarket: The Same Old Song
The Independent Investor: The Impact of One Bad Apple
@theMarket: Much Ado About Nothing
The Independent Investor: Woman Need to Invest More
@theMarket: Markets Get Back to Business
The Independent Investor: The VA — If It Isn't Broke, Don't Fix It
@theMarket: A Tale of Two Interest Rates
The Independent Investor: The VA — Political Football